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The price competition offered by matching sellers with legions of
online buyers was once predicted to be the permanent model of how
commerce took place on the internet. Indeed, it led to the
popularity of companies like eBay, which, over the past 15 years,
perfected the model, only to be joined by other e-commerce
giants getting into the auctions business.

But now, auctions are almost a nonentity. Online commerce
continues to grow, but the share of auction transactions has
shrunk. Instead, buyers are paying the retail prices they see.
Even eBay no
longer has a majority of its transactions occurring via auctions.

So what happened? Well, it turns out that consumers don't find
auctions worth the bother. According to a working paper by three Stanford University
economists and an economist for eBay Research Labs, posted by
the National Bureau of Economic Research, buyers just think
auctions aren't worth the trouble -- even if it means getting
a better price.

In fact, auctions aren't that entertaining anymore.

"Ten years ago, internet auctions were a form of online
entertainment," the authors conclude. "Today, YouTube, Facebook
and other online diversions may have increased the demand for
convenient shopping."

Auctions, of course, were never convenient. A buyer finds a
product he's looking for, and then places a bid. That's where the
fun -- more accurately, the work -- begins. In a
competitive-bidding environment, bidders have to top one another.
Often, for hard-to-get items, that meant furious bidding in the
last seconds.

It was a good proposition in the beginning because, frankly, it
was entertaining. Sellers got a higher profit as bidding took
place, and the buyers got their products after engaging in cyber
warfare with their consumer rivals.

But scale took a bit of the fun out of the process. Retailers
began selling products on auction platforms like eBay in a big
way. That made those platforms less likely to attract buyers
looking for odder items, which lent themselves to auction
bidding. (The authors point out eBay's first item sold was a
broken laser pointer.)

Not every buyer was that interested in bidding, so posted retail
prices emerged and quickly overtook both share in items sold and
revenue from auctions.

Some circles have lamented the downfall of the online auction as
being bad for price discovery. If sellers set the price, rather
than buyers, they are somehow more capable of overcharging
customers. Posted bids made the buying of goods more transparent.

But consumers have actually benefited more from posted prices and
the shift away from auctions. For one thing, just because
competitive bidding is dying doesn't mean that competitive
pricing is headed for the grave, as well. In fact, the online
buyer can comparison shop for any item simply by using Google. It
is incumbent on the seller to price down, rather than the buyer
to bid up.

Second, buyers have rationality in their purchasing. It is true
that, in a free market, the value of any item is "worth" whatever
someone is willing to pay for it. But, come on: $150 for a My Little Pony ?

With apologies to Bronies, that is still an area, the
authors note, where auctions will always have a place. The
more idiosyncratic the item, the more auctions make sense.

But for most items, competitive posted prices are the way to go.
They may not be fun, but they seem far more profitable for
everyone.